Tesco to invest US$750M in 2013 to accelerate roll-out of digital services, plans to compete with Amazon, Netflix for UK customers; CEO Philip Clarke says Tesco must become technology company as well as a retail company

Cindy Allen

SINGAPORE , March 20, 2013 (Bloomberg LP) – Tesco Plc, the U.K.’s largest grocer, will invest $750 million this year to accelerate the roll-out of digital services and plans to vie with Amazon.com Inc. and Netflix Inc. for U.K. customers, Chief Executive Officer Philip Clarke said.

“To compete in the new area of retailing I believe that Tesco has to be more than a retail company,” Clarke said at a conference in Singapore today. “We have to become a technology company as well. That’s why, in 2013, we will invest three quarters of a billion U.S. dollars in technology, up threefold in three years.”

Retailers across the world are racing to build online stores as customers shift to shopping via computers, mobile phones and tablets. Tesco has also created a digital platform called Blinkbox in response to customers increasingly downloading movies, books and music online, rather than buying DVDs or CDs in supermarkets or from town-center stores.

“Last year in the U.K., sales of physical books, movies and music fell by 25 percent,” Clarke said. “Internet versions grew by 150 percent.”

This month Tesco started a free Internet television service for the 16 million members of its Clubcard loyalty program. Clubcard customers can watch television shows and movies, with the content “specifically tailored to family and kids,” Tesco said.

The channel, called Clubcard TV, will be funded by “targeted advertising,” Tesco said, and advertisers that have signed up for the introduction include Kellogg Co., Johnson & Johnson, Colgate-Palmolive Co. and Danone SA.

Tesco, which has stores in China, Thailand, Malaysia and Korea, will also roll out its online grocery offering across Asia, Clarke said.

“Last year I called time on the old ‘space race’ -- I said that in the future, we wouldn’t simply grow by buying more real estate, but instead change the way we engage with our customers and embrace digital retailing,” he said.

--Editors: Tim Farrand, Kim McLaughlin

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Klaus Wille in Singapore at kwille@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.